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Bankrate's Smart Money Moves for 2009
Smart strategies for '09
No doubt about it -- this past year was anything but fiscally smooth. We provide ideas for a successful 2009.
Q&A on the economy
Tips to coping with the economy in '09
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If you get laid off, what are some of the immediate steps you should take?

That's where you really have to take a long hard look at your expenses. At that point you're not in a position to build a savings cushion. The biggest step you can take is cutting expenses, and if it takes a drastic cut just for a couple of months, it can make a huge difference until you can get back on your feet and back to work.

For emergency funds, the recommendation is to save three to six months' worth of living expenses in a money market or savings account. Given that an increasing number of people are going without work for more than six months, how much money should people, ideally, be socking away?

As of October (2008), there are 2.3 million people that have been out of work six months or longer. The short answer is that more savings is better than less. Keep in mind the unemployment rate might go to 8 percent or 9 percent, but even then, 91 percent or 92 percent of the people are still working. So, don't completely eliminate your 401(k) contributions and other savings goals unless you feel there's a real risk of your job being cut. Scaling back retirement contributions to build a savings cushion is one thing. But stopping completely is something that really should only be done if you're facing an imminent risk of job loss.

Credit card issuers are tightening lending standards and reducing their risk. How should consumers deal with reduced credit limits and tougher approval standards?

This advice never changes. Pay down your debt and don't add to it. But also, keep a close eye on your credit limits because paying your bills on time isn't enough to avoid a reduction in your credit line. Making minimum payments and having an escalating balance are red flags to credit card issuers.

Is it a good idea in this environment to open up new cards and do balance transfers in order to reduce your debt?

Here's the thing. A balance transfer is great, but it's only the first step in a two-step process. The second and most important step is to then use that lower-rate card to accelerate your debt repayment. Opening new cards and transferring balances will do more harm than good without that all-important follow-though of aggressive debt repayment.

Lastly, what should people do if their bank fails or merges with another financial institution? How do you protect your accounts?

In most cases, a bank failure is more like a bank merger. As long as your money is FDIC-insured, you have no need to worry. Be advised that having a home equity line of credit could see that line frozen in the event the bank fails. Just make sure your deposits are fully covered by deposit insurance. At that point, the bank failure is the bank's problem, not your problem.

-- Posted: Dec. 29, 2008
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